Federal deficit to hit $1 trillion this year

The federal deficit will reach $1 trillion this year and remain above that level for the rest of the decade, the government’s official scorekeeper said Tuesday, highlighting an ever worsening fiscal picture.

Debt held by the public also will rise from 81% of gross domestic product to 98% by 2030, and will soar in the years after that, reaching a halting 180% by the middle of the century, the Congressional Budget Office said.

CBO said the problem is on both sides of the ledger. Tax revenue is lower than usual, at just 16.4% of GDP. Spending, meanwhile, is higher than average, at 21% of GDP.

The gap between those is the deficit, and it’s only going to get worse, the analysts said.

The good news for President Trump is that the economy as measured by GDP is expected to grow by 2.2% in 2020 — an election year — with strong demand for labor keeping unemployment rates low and sending wages rising.

The bad news for Americans is that the president’s penchant for slapping tariffs on other countries’ goods is biting them, siphoning $1,277 off the average household’s income this year, the CBO said.

For the federal government, the bad news is that a spending and tax-cut spree Congress and the president went on over the last six months has made the fiscal situation worse.

The 2020 deficit of $1.015 trillion is $8 billion higher than the CBO predicted in August.

It’s still not as high as the record year of 2009, split between President Bush and President Obama, which topped out at $1.413 trillion amid the Wall Street collapse and Great Recession.

The government is projected to break that record in 2028.

CBO analysts said the deficits are particularly bad for an economy that is growing as well as the current one is. Deficits dropped after the 2008 recession as the economy picked up, but there’s no such slack built into the current picture.

“We’re running trillion-dollar deficits while the economy is expanding — when are lawmakers going to wake up?” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

“Ignoring what is staring us right in the face is fiscal malfeasance.”

The numbers tell the story: By 2030, CBO says, debt held by the public — which does not include the IOUs for the Social Security trust fund, for example — will top $30 trillion. That’s nearly double the $16.8 trillion Mr. Trump ended 2019 with.

The gross debt, including the IOUs and other government accounts, will reach $36.2 trillion.

The years beyond 2030 also look “daunting,” the CBO said. Not only is population growth slowing, sapping the economy of productive workers, but deficits also will tamp down on the economy’s potential by crowding out private capital and market decisions.

“When the government borrows, it borrows from people and businesses whose savings would otherwise be financing private investment,” the CBO said. “Although an increase in government borrowing strengthens the incentive to save, the resulting rise in saving is not as large as the increase in government borrowing.”

CBO’s warnings aren’t new, though they are somewhat more grim than previous ones.

Yet Congress has brushed aside the earlier ones, approving massive tax cuts and major spending increases under Mr. Trump.

Predictably, each party blamed the other.

“The budget baseline released by CBO today confirms that President Trump’s economic policies did not create a sustained boost for the economy like he has claimed,” said House Budget Committee Chairman John Yarmuth, Kentucky Democrat.

His GOP counterpart on the committee, Rep. Steve Womack, the ranking Republican, pointed out that Mr. Yarmuth and fellow Democrats didn’t even manage to write a budget last year.